Category: Legislative Updates

The One Big Beautiful Bill Act created a new tax-advantaged vehicle called a Trump Account (TA), which is a new type of traditional individual retirement account (IRA) established by authorized individuals for the benefit of eligible children. These TAs are intended to encourage children to start saving and investing at an early age. Contributions to TAs may start July 4, 2026, and can be made by anyone, including parents/guardians, grandparents, philanthropic contributors and even employers. The rules governing TAs are complex and there remain several unresolved issues that require further guidance in advance of the July 2026 start date. For now, employers interested in potentially funding TAs for the children of their employees or for their minor workers should continue to monitor developments in this space. The following is a summary of the rules for consideration by employers:

Trump Account Basics

• Qualifying parents and guardians may open a TA on behalf of any child who is under the age of 18 and a United States citizen. Taxpayers will use a new IRS Form 4547 to establish TAs for eligible children.
• TAs may receive contributions from a variety of sources, including family members, employers, government agencies, and private charities.
• TAs are tax-advantaged savings and restricted investment accounts established for the exclusive benefit of individuals under the age of 18 for whom a Social Security Number has been issued.
• Contributions to a TA are subject to an aggregate annual limit of $5,000, as adjusted for inflation after 2027. With some limited exceptions, the contribution limit applies in the aggregate across all sources (i.e., a parent and an employer together cannot contribute more than $5,000 per year per TA), although the federal government’s $1,000 pilot program contribution is not counted against this limit.
• Principal and earnings on pre-tax contributions (e.g., the federal seed money and certain employer contributions) are taxed as ordinary income.
• The timing and tax treatment of distributions from TAs are complicated and depend on the type of contribution at issue, the age of the beneficiary, and the purpose of the distribution.
• In general, no distributions may be made before a beneficiary attains age 18. Thereafter, accounts may be distributed in much the same way as an IRA (i.e., for certain qualifying purposes before age 59 ½).
• Initial guidance was published in December 2025 as Notice 2025-68, covering rules for establishing a TA, making contributions, distributions and investments. The IRS has also provided additional information about the TAs on new governmental websites: trumpaccounts.gov and White House FAQs.

Federal Pilot Program Seed Money Contributions

• As part of a pilot program, the federal government will seed with $1,000 the accounts of eligible children born after December 31, 2024 and before January 1, 2029.
• For an eligible child to receive a $1,000 pilot program contribution, an election must be filed by an individual, typically a parent or guardian, who anticipates the child will be their qualifying child under IRS Section 152(c) for the year during which the election is made.
• The parent (or other individual who qualifies to make the election) must also establish a TA for the child. For qualifying children, the Treasury Department may open a TA to hold start-up payments in the absence of any parental election.
• Taxpayers will use a new IRS Form 4547 to establish TAs for eligible children and this same form is used to make an election to participate in the $1,000 pilot program.
• IRS Form 4547 can be filed at any time, including at the same time as the electing individual’s 2025 income tax return is filed. Beginning mid-2026, these elections can also be made through an online account at trumpaccounts.gov.
• In March 2026 the IRS issued proposed rules on the pilot program. The proposed rules would establish a broad election period for the pilot program, beginning on the day that a child becomes eligible and ending on December 31 of the calendar year in which the eligible child reaches age 17.
• A pilot program election could be made any time during the proposed election period, including when the pilot program-electing individual files their federal income tax return. However, the pilot program election is not a part of any individual’s tax return and must be done separately using Form 4547.
• According to the IRS, the pilot program contribution will be made as soon as practicable after the election is made and the IRS can confirm that the initial TA has been opened. However, no pilot program contribution will be deposited in the TA of a child earlier than July 4, 2026.

Employers May Make Contributions

• Beginning July 4, 2026, employers may choose to contribute to the TAs of their eligible employees or the employees’ dependents pursuant to an IRS Section 128(c) Trump Account Contribution Program (TACP).
• Employer contributions up to $2,500 per employee per year (subject to cost-of-living adjustments after 2027) are allowed and are not includible in the employee’s income for federal tax purposes so long as the employer has established a TACP pursuant to a written plan document that meets requirements similar to certain rules that apply to dependent care assistance programs (DCAPs) regarding discrimination, eligibility, notifications and benefits.
• As an example of the $2,500 per employee annual contribution limit, an employer with two employees who share an eligible dependent could contribute up to $2,500 on behalf of each employee to the dependent’s TA for 2026. In contrast, if an employee has two or more eligible children with TAs, an employer with a TACP may not contribute more than $2,500 in the aggregate for 2026 to those accounts.
• The $2,500 per employee annual contribution limit includes any employee pre-tax salary reduction contributions made through a cafeteria (IRS Section 125) plan on behalf of an employee’s dependent.
• Employers making contributions pursuant to a TACP must affirmatively indicate to the TA trustee that the contribution is an employer contribution excludible from the employee’s gross income.

Employers Can Allow Cafeteria Plan Elections

• Employers may choose to set up a specific written cafeteria plan benefit to allow employees to make pre-tax salary reduction contributions of up to $2,500 annually per employee (indexed) specifically for their dependent’s account.
• These employee pre-tax contributions are allowed for dependents under 18, but not for a young adult employee’s own account, as that would constitute prohibited deferred compensation.
• The IRS has indicated that specialized, updated cafeteria plan guidelines will soon be issued related to the establishment of these qualified benefits under a cafeteria plan.

Employers may want to be prepared to answer questions from their employees about the TAs and the availability of employer contributions and pre-tax employee contributions. In the meantime, employers may begin to consider whether to fund TAs and how/if to implement an employer program and whether to create a salary election option under their Section 125 cafeteria plan. We expect forthcoming guidance to provide more details on implementation and funding issues, and we will provide more details on how to address the establishment and operation of TAs and TACPs and coordination with Section 125 plans and how nondiscrimination rules, including for salary deferrals, will apply.

We will provide alerts and updates as new information becomes available. As always, Conner Strong & Buckelew is prepared to assist our clients with any benefit changes or additions they might wish to consider later this year and into the future. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions.

For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

Group health plan (GHP) sponsors that offer prescription drug (Rx) coverage must, at least annually, notify Medicare Part D eligible individuals and the Centers for Medicare & Medicaid Services (CMS) of their plan’s creditable coverage status. Both disclosures (to Medicare Part D eligible individuals and to CMS) must meet specific form, content and timing requirements as prescribed by CMS. This update addresses the required disclosure to CMS and reminds plan sponsors that online disclosure should be completed annually no later than 60 days from the beginning of the plan year. This means that an employer with a calendar year plan that began January 1, 2026, must complete the CMS online reporting no later than March 1, 2026, and an employer with a plan year that begins July 1, 2026, must complete the reporting no later than August 29, 2026. (For more information on the Medicare Part D disclosure requirement for individuals, please see our update, Medicare Part D Notices Due Before October 15th).

Medicare Part D Notice to CMS Rules

Medicare Part D rules generally require that GHPs with an Rx benefit must disclose to CMS whether the Rx coverage offered is “creditable” or “non-creditable.” Individuals who fail to enroll in Medicare Part D Rx coverage when first eligible may be subject to late enrollment penalties if they go 63 consecutive days or longer without creditable Rx coverage. Because of this potential penalty, both Medicare Part D eligible individuals and CMS need to know whether the GHP’s Rx coverage is creditable or non-creditable. Rx coverage is “creditable” when it is at least actuarially equivalent to Medicare Part D Rx coverage. “Non-creditable” Rx coverage is actuarially less in value (expected to pay out less) than the coverage offered under Medicare Part D. An Rx plan must use electronic transmission of the required annual CMS notice as the sole method for compliance with this requirement, accessing the online CMS Disclosure Form to report its “creditable” or “non-creditable” Rx status at the times noted below. Guidance and instructions are provided to assist Rx plan sponsors with completing the form.

Disclosure Timing

The CMS disclosure must be made annually and whenever any change occurs that affects whether the Rx plan’s coverage is creditable. CMS should receive a creditable coverage disclosure:

1. Within 60 days of the beginning of the plan year for which the disclosure is being reported.
2. Within 30 days of a change in creditable coverage status.
3. Within 30 days of the Rx plan’s termination.

A GHP is not required to submit the online disclosure form to CMS for any plan year where the plan does not offer Rx benefits to any Medicare Part D eligible individuals as of the beginning of the plan year. Also, plan sponsors approved for the retiree drug subsidy are exempt from filing the CMS disclosure notice with respect to those qualified covered retirees for whom the sponsor is claiming the subsidy. Note that this creditable coverage reporting is in addition to the mandatory CMS Medicare Secondary Payer (MSP) reporting typically handled by an insurer or third-party administrator for a GHP (see the CMS site on Mandatory MSP Reporting for more information).

Should you have questions about this or any aspect of GHP requirements, please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The Affordable Care Act’s (ACA) enhanced premium tax credits for low-income earners needing individual coverage were first expanded under the American Rescue Plan Act (ARPA) of 2021 and extended through 2025 under the Inflation Reduction Act (IRA). These subsidies are now set to expire on December 31, 2025. This has been a hotly debated issue and was in part what Congress and the President were fighting about, which led to the government shutdown. Objectively, these enhanced credits have lowered premiums and broadened eligibility, including to middle-income households above 400% of the federal poverty level. Their expiration will take effect for coverage beginning in January 2026, and if they lapse, millions of Americans may face substantially higher marketplace premiums or lose eligibility for financial aid. Analysis indicates that without these credits or a replacement solution, premium contributions for many in the individual markets could more than double in 2026.

Why It Matters to Group Health Plans

The expiration of ACA marketplace subsidies has implications for employer-sponsored and other group health plans. Here’s why:

1. 1. Competitive Pressure on Employer Plans: Higher individual market premiums could push some workers toward employer coverage, altering risk pools and potentially raising costs for group plans, especially smaller employers that compete with ACA markets for enrollees. It may also alter the effectiveness of ICHRA plans that some employers are considering. A destabilized individual market could undercut the practicality of ICHRAs.
   2. COBRA and Retiree Decisions: Individuals who temporarily rely on ACA plans (e.g., early retirees or employees in COBRA) may no longer find marketplace coverage affordable, increasing pressure on employers to provide robust retiree benefits.
   3. Labor Market Effects: Rising individual market costs could influence employment decisions, wage negotiations, and benefits strategies as jobseekers weigh total compensation offers that include healthcare.
   4. State Policy Responses: Some states may create supplemental state subsidies to offset federal cuts, affecting the design and cost of both marketplace and employer plans (and may impose tax increases on consumers and businesses to pay for it).

What Congressional Democrats Want

Democrats in Congress have primarily advocated for a clean extension of the enhanced premium tax credits. Proposed Democratic legislation would continue the level of subsidy assistance for multiple years, maintaining income-based caps and marketplace affordability for the roughly 20 million Americans enrolled in subsidized plans under the Affordable Care Act. One proposal backed by Democrats would extend the subsidies for three years, though it would increase the federal deficit. In the Senate, a Democratic bill to extend the enhanced credits failed this past week after falling short of the 60 votes required to overcome a filibuster. Despite some public support for extension, partisanship and opposing healthcare policy priorities have blocked passage.

What Congressional Republicans and President Trump Want

Republican approaches vary but generally do not extend the enhanced ACA premium tax credits in their current form. They propose alternative mechanisms that include:

1. House GOP Proposals: Recent Republican healthcare packages would allow the enhanced subsidies to expire and shift focus to other reforms, such as expanding association health plans, increasing PBM oversight, and modifying cost-sharing reduction payments, but do not include renewed ACA premium subsidies.
2. Senate GOP Alternatives: Senate Republicans, including Senators Bill Cassidy and Mike Crapo, have proposed replacing some of the subsidy value with direct federal contributions into health savings accounts (HSAs) for individuals, particularly those in high-deductible or bronze plans, rather than continuing the existing premium credits. These HSA-oriented ideas aim to give recipients more control over expenses but would not directly offset marketplace premium increases.
3. Trump Administration Position: President Trump and aligned GOP leaders have promoted the idea of sending money directly to individual consumers through flexible accounts or other mechanisms rather than continuing ACA tax credits, reflecting a broader preference for consumer-driven healthcare solutions.

Both the House and Senate Republican proposals have faced internal dissent and insufficient support to advance legislation, and in recent Senate votes, neither the Democratic subsidy-extension bill nor the Republican alternatives received the 60 votes needed to proceed. If no new law is enacted before year-end, the enhanced tax credits will expire at the end of 2025, likely triggering higher premiums and reduced marketplace affordability in 2026, and creating uncertainties for both individual purchasers and employers managing benefits strategies.

Bottom Line

As of this date, there is no clear-cut plan that both Democrats and Republicans support, so here’s where we’re at:

1. Temporary ACA premium subsidies enacted during COVID (ARPA) and extended by the IRA are set to expire December 31, 2025.
2. Their expiration would make coverage more expensive for millions who buy individual coverage, increase marketplace premiums, and reshape individual versus group plan dynamics.
3. Democrats want to extend the subsidies to maintain affordability while Republicans favor alternative frameworks (HSAs, consumer-driven plans).
4. No legislative consensus has been reached, leaving the subsidy’s future uncertain and premiums likely to rise if Congress does not act.

Conner Strong & Buckelew is closely monitoring these important developments and will provide updates as they become available.

Each year group health plan (GHP) sponsors that provide prescription drug (Rx) coverage are required to annually disclose to Medicare Part D eligible individuals whether the coverage they offer is “creditable” or “non-creditable.” This is a mandatory annual requirement to inform Medicare-eligible individuals if their employer-sponsored Rx coverage is at least as good as Medicare Part D coverage, which helps them avoid lifetime late enrollment penalties. Plan sponsors must provide this annual disclosure before the start date of the annual Medicare Part D enrollment period, which begins on October 15th each year. This communication outlines what GHPs need to know related to the Part D notice requirements.

Who Must Receive Notice and Why It Matters

Medicare includes a voluntary Rx benefit for “Part D eligible individuals.” These are individuals who have coverage under Medicare Part A or B and who live in the service area of a Part D plan. Notice must be provided to all Medicare Part D eligible individuals, which may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents. As a practical matter, GHP sponsors will often provide the notices to all plan participants. The Part D notice is important because a Part D late enrollment penalty is imposed on individuals who do not maintain “creditable coverage” for a period of 63 days or longer following their initial enrollment period for the Medicare Rx benefit. Accordingly, the Part D notice information is essential to a Part D eligible individual’s decision whether to enroll in a Medicare Part D plan or stay with the employer plan. Failing to provide the notice could be detrimental to these individuals because if they are not covered by creditable Rx coverage and do not enroll in Medicare Part D when first eligible, they may have to pay higher premiums if they enroll later.

Form of Notice and When to Provide

Medicare Part D notices must be provided prior to the Part D annual coordinated election period—beginning October 15 through December 7 of each year. This means the individual must be provided with the notice at least once annually in every 12-month period ending on October 14, which is just before the start date of the Part D annual period. Plan sponsors must also provide notice at various other times as required under the law, including to a Part D eligible individual when he/she joins the plan, upon request, and if the Rx benefit ever changes from creditable to non-creditable (or vice versa). CMS has provided English and Spanish model disclosure notices that can be tailored by plan sponsors to satisfy their notice obligation. See the CMS Creditable Coverage web page for general Part D notice guidance for employer and union-sponsored plans.

How Notice Must Be Provided

As a practical matter, GHP sponsors will often provide the disclosure notices to all plan participants by including the notice in the new hire and annual open enrollment materials:

1. If a plan sponsor chooses to provide the disclosure notice with other plan participant information, the creditable coverage disclosure must be prominent and conspicuous. This means that the disclosure notice portion of the document—or a reference to the section in the document that contains the disclosure notice portion—must be prominently referenced in at least 14-point font in a separate box, bolded or offset on the first page of the provided plan participant information.
2. As a general rule, a single disclosure notice may be provided to the covered Medicare beneficiary and all of his/her Medicare Part D-eligible dependents covered under the same plan. However, if it is known that any spouse or dependent who is eligible for Medicare Part D lives at a different address than where the participant materials were mailed, a separate notice must be provided to the Medicare-eligible spouse or dependent residing at a different address.
3. The notice may be sent electronically under certain circumstances. CMS has issued guidance indicating that health plan sponsors may use the electronic disclosure standards under DOL regulations in order to send the creditable coverage disclosure notices electronically. Also, if a plan sponsor uses electronic delivery, the sponsor must inform plan participants that they are responsible for providing a copy to their Medicare-entitled dependents, and the sponsor must also post the current version of their notices on their websites.

Creditable Coverage Status Determined for Each Applicable Option

GHPs subject to the notice requirement include health plans as defined under ERISA, including certain account-based medical plans, as well as GHPs sponsored for employees or retirees by unions, churches, and federal, state, or local governments. The notice requirements apply to insured and self-funded plans, regardless of plan size, employer size, or grandfathered status. For a list of entities subject to the Medicare D disclosure requirement, see Entities Required to Provide Disclosure to All Medicare Eligible Individuals.

1. For plans that have multiple Rx benefit options (e.g., PPO and HDHP), the creditable coverage determination test and related notice obligation must be addressed separately for each benefit option.
2. Before preparing the notices, a plan sponsor must first determine whether the Rx coverage is “creditable.” While Conner Strong & Buckelew can assist with this determination, often it is the insurance carriers and third party administrators that will determine whether or not the Rx coverage is creditable for purposes of Medicare Part D.
3. In general, to be creditable, the expected amount of paid claims under the plan sponsor’s Rx coverage must be at least as much as the expected amount of paid claims under the standard Medicare Rx benefit. CMS guidance provides two ways to make this determination, through a simplified (safe harbor) determination or actuarially. CMS has offered an “existing simplified method” for determining creditability, but given changes to Medicare Part D under the Inflation Reduction Act of 2022 they revised the simplified determination method. Under the “revised simplified method”, GHP coverage must be designed to pay, on average, at least 72% of participants’ Rx expenses (versus 60% under the existing methodology) to be considered creditable coverage. For now, CMS has decided to continue to permit use of the existing simplified method, without modification, for calendar year 2026 for GHP sponsors who are not applying for the retiree drug subsidy (RDS). Therefore, for calendar year 2026 only, non-RDS plans are permitted to use either the existing simplified method or the revised simplified method.  Pending future guidance, the revised simplified determination method may be used for all plan years beginning in calendar year 2026.

Related Online CMS Disclosure

A related Medicare Part D disclosure rule requires that sponsors complete the Online Disclosure to CMS Form to report the creditable coverage status of their Rx plan(s). This online disclosure should be completed annually no later than 60 days from the beginning of a plan year (contract year, renewal year), within 30 days after termination of an Rx plan, or within 30 days after any change in creditable coverage status. See our previous update for more information on this requirement.

Should you have questions about this or any aspect of group health plan requirements, contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

On July 4, 2025, a major tax and spending bill was signed into law, commonly referred to as the One Big Beautiful Bill Act (the “OBBB”). See our recent Update for a general summary. This Update provides details on a new type of children’s savings account created by the OBBB called “Trump Accounts” (previously referred to as “Invest America” accounts). Employers may want to consider establishing a new tax-favored “Trump Account” benefit for employees, effective for tax years beginning in 2026. In the meantime, we are awaiting further guidance on “Trump Accounts,” including more information on the specific rules that will apply to employer contributions. We have provided a summary below of some of the basic Trump Account rules.

Overview of “Trump Accounts” and Basic Structure Outline

• Trump Accounts may be established for all eligible children (under the age of 18), effective for tax years beginning in 2026.
• Contributions may begin on July 4, 2026 (12 months after the OBBB enactment).
• Contributions may be made by parents, relatives, or other taxpayers.
• There is a $5,000 per year contribution limit (indexed) per child for amounts deposited by parents/other taxpayers and employers.
• Annual contributions can only be made until the child reaches age 18.
• An eligible child who is a U.S. citizen with a Social Security number, born between January 1, 2025, and December 31, 2028, may receive a $1,000 contribution from the federal government.
• The $1,000 federal government contribution for newborns does not count toward the $5,000 annual limit (so a newborn can receive a total $6,000 contribution in their birth year).
• Trump Accounts are treated similarly to traditional individual retirement accounts (IRAs) for tax purposes, although taxpayers’ contributions are not tax-deductible.
• Investment earnings grow tax deferred.
• Withdrawals for any reason are permitted beginning at age 18.
• Distributions are generally taxable (treated as ordinary income) to the extent they exceed taxpayer contributions.

Employer Benefit Option

• Employers may establish a Trump Account Contribution Program.
• Employers can contribute up to $2,500 per year (indexed) on a tax-free basis to the Trump Accounts of employees’ dependents (or teenage employees).
• Employer contributions count toward the $5,000 annual (indexed) limit.
• There is no option for employees to contribute through payroll on a pre-tax basis because Trump Accounts are not a Section 125 qualified benefit.
• There is no option to embed tax-free contributions into any broader tax-preferred arrangement such as flex credits through a cafeteria plan or a lifestyle spending account (LSA).
• The Program must be established pursuant to a written plan document.
• Eligible employees must receive reasonable notification of the Program’s availability and terms.
• The Program is not an ERISA benefit, so it is not a required part of an ERISA wrap plan document/SPD, and the Program will not be reportable on a Form 5500.
• The Program must meet certain tax rules similar to those that apply to dependent care flexible spending accounts.
• The Program’s eligibility rules, contributions, or benefits cannot discriminate in favor of highly compensated employees or their dependents.
• On or before January 31 each year, employees must be provided with a written statement showing the amounts paid or expenses incurred by the employer in providing the program during the previous calendar year.

Next Steps

The OBBB did not address all of the details of how the federal agencies will implement Trump Accounts, including how Accounts can be opened, how the taxing agencies will interact with private IRA/account providers, and the forms and process for parents to prove eligibility for the $1,000 seed contribution from the federal government. We are expecting more guidance addressing eligibility criteria, implementation timelines and administration details. Employers interested in a Trump Account Contribution Program should watch for this guidance in the near future. We will provide alerts and updates as new information becomes available. As always, Conner Strong & Buckelew is prepared to assist our clients with any benefit changes or additions they might wish to consider later this year and into the future. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

President Donald Trump’s One Big Beautiful Bill (OBBB) was signed into law on July 4th. The OBBB was subject to intense negotiation and significant change as it worked its way from the House through the Senate. In the end, the OBBB includes multiple significant benefit provisions that impact employer and group sponsored plans. Most notably, the OBBB provides some additional flexibility in Health Savings Account (HSA) plan design and retroactively makes permanent the extension of the provision giving employers the permanent flexibility to offer telehealth services pre-deductible to employees with an HSA eligible high-deductible health plan (HDHP).

Below is a summary of the provisions of the OBBB that impact employers and group benefit plans:

Health Savings Account Expansions

1. Pre-Deductible Telehealth Coverage Made Permanent: The OBBB now provides permanent relief allowing HDHPs to provide first-dollar telehealth and other remote care services. This change is effective retroactively to plan years beginning after December 31, 2024. The prior COVID-19 temporary relief allowed individuals to maintain HSA eligibility even where their HDHP waived the deductible for any telehealth or other remote care, but that relief only extended to plan years beginning before January 1, 2025.  Accordingly, employers who intended to ensure that their employees remained HSA eligible during the 2025 plan year and beyond needed to consider making changes to their telehealth benefit offerings to preserve HSA eligibility.  See our Update on the prior temporary relief. Employers who began charging fair market value for a telehealth visit until the minimum HDHP deductible is met, or who otherwise stopped pre-deductible coverage, may wish to now align plan design and communications with the permanent safe harbor and its retroactive application.
2. All Bronze and Catastrophic Plans Available on Exchange are HDHPs: HSA eligibility is required for any individual to establish an account and make or receive HSA contributions. To be HSA eligible, individuals must be covered by a qualified HDHP.  Effective in 2026, the OBBB automatically treats all Bronze and Catastrophic level plans that are available on the individual market through the Exchange as an HDHP.  Currently, most of these plans are not HSA compatible.  ICHRA sponsors may consider educating their employees about Bronze or Catastrophic ACA exchange plans being HSA-compatible.
3. Direct Primary Care Integrated with HSA Eligibility: Effective in 2026, the OBBB specifically excludes direct primary care (DPC) arrangements from being a form of HSA disqualifying coverage and provides that HSA funds can be used tax-free to pay periodic fees for DPC arrangements.  These provisions apply only to DPC arrangements with a monthly fee of $150 or less ($300 if the arrangement covers more than one individual).

Dependent Care FSA Limit Increase to $7,500

Since 1986, the dependent care flexible spending account (FSA) limit has been set at $5,000 (not indexed for inflation). Effective for tax years beginning on and after January 1, 2026, the OBBB increases the annual limit on contributions from $5,000 to $7,500 ($3,750 for taxpayers who are married filing separately). The new amounts are still not indexed for inflation going forward.

Student Loan Repayment Assistance Made Permanent

Since 2020 and through the end of 2025, employers have been able to provide up to $5,250 per year to employees for tax-free student loan repayment assistance under a qualified Section 127 Educational Assistance plan. The OBBB now makes this permanent, extending this opportunity into the future beyond 2025. This benefit can be used to pay for student loans of the employee, and can also be used to pay for student loans where the employee is legally obligated to make payments on behalf of a tax dependent, such as when a parent/employee co-signs for a student loan of a dependent child. This limit, which has been fixed at $5,250 since 1979, will now be indexed.

Invest America/Trump Accounts

The OBBB creates the new “Invest America” or “Trump Accounts” starting in 2026, providing for a $5,000 annual contribution limit for a child. Trump Accounts investments grow tax-deferred, and children born in 2025-2028 will receive a $1,000 federal contribution. Employers may also contribute up to $2,500 per year (indexed) to the Trump Accounts of employees or their dependents on a tax-free basis.  These accounts will require a written plan document and must comply with nondiscrimination rules similar to those that apply to dependent care FSAs.

Tax-Free Bicycle Commuting Reimbursement Permanently Repealed

The OBBB has now permanently removed the tax-free bicycle commuter benefit option. A $20/month tax-free benefit that was originally added to the tax code in 2009 permitted employers to reimburse certain bicycle commuting benefits. This tax benefit was temporarily repealed from 2018 to 2025.

Summary

The OBBB provisions provide several meaningful new options for employers to consider moving into 2026.  As always, Conner Strong & Buckelew is prepared to assist our clients with any changes they might wish to consider later this year and into the future. We also note that given the Republican focus on HSA issues, there may be more to come related to a more comprehensive package of HSA reforms over the coming months. Should you have questions, contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

The Patient-Centered Outcomes Research Institute (“PCORI”) fee was established as part of the Affordable Care Act (“ACA”) to fund medical research through the PCORI Institute. Employers and plan sponsors who sponsored a self-insured medical plan that ended anytime during calendar year 2024 are required to report and pay the PCORI fee no later than July 31, 2025. Detailed guidance regarding how to calculate, report, and pay the fee is provided on the IRS PCORI fee webpage. A summary of key facts is below.

Applicable Plans

Plan sponsors of fully insured medical plans are not responsible for paying the PCORI fee (the obligation rests with the insurer). Plan sponsors of most self-insured medical plans (including health reimbursement arrangements or HRAs) are required to pay the PCORI fee. Special rules apply, such as multiple self-insured arrangements established and maintained by the same plan sponsor and with the same plan year are subject to a single fee. See this IRS chart for details on the different types of plans subject to the fee.

Due Date

The PCORI fee payment deadline is July 31, 2025, for plan years that end in calendar year 2024.

Fee Amount

PCORI fees are based on the average number of covered lives under the plan or policy. “Covered lives” generally include employees (and retirees) and their enrolled spouses and dependents, as well as individuals who are receiving COBRA or other continuation coverage. The PCORI fee due differs based on the employer’s plan year(s):

1. For plan years that ended on or after January 1, 2024 through September 30, 2024, the fee is $3.22 per covered life.
2. The fee payable for plan years ending on or after October 1, 2024 through December 31, 2024, is $3.47 per covered life.
3. Plan sponsors of self-insured medical plans must use one of three existing permissible methods to determine the average “covered lives” used for reporting and paying the PCORI fee. See Q&As 4-6 in the PCORI Fee FAQs.
4. Plan sponsors who made a change to their funding arrangement/plan offering during the 2024 calendar year (for example, moved to self-insured plan or added an HRA mid-year) may need to pay a PCORI fee for that plan year ending in 2024. And plan sponsors who made a change to their plan year causing there to be two plan year ending dates within the 2024 calendar year (short plan years) may need to pay a PCORI fee for both plan years. See Q&As 12-14 in the PCORI Fee FAQs.

Remittance

The PCORI fee is paid using the June version of IRS Form 720, Quarterly Federal Excise Tax Return, and completing Part II, Number 133(c) and (d) of Form 720. Specific instructions regarding PCORI can be found on page 9 of the Form 720 Instructions. Plan sponsors who are not required to report any other liabilities on a Form 720 will be required to file the Form only once per year. Note that in the header of the Form, the quarter ending date should be completed as “June 30” or “June 30, 2025”, to indicate the Form is being filed for the 2025 second quarter. Plan sponsors are not required to pay the fee electronically, but if paid through the Electronic Federal Tax Payment System, the payment should be indicated as applied to the second quarter. If paid by mail, it is very important that the Payment Voucher (720-V) indicate the tax period for the fee is for the “2nd Quarter” (otherwise IRS may send a late notice).

Should you have questions about this or any other aspect of healthcare reform, please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.